United States Court of Appeals
For the First Circuit
No. 02-1499
ALGA MORALES-VILLALOBOS,
Plaintiff, Appellant,
v.
MIGUEL GARCIA-LLORENS; JOSE ARTURO GARCIA-LLORENS; MANUEL MATOS;
HOSPITAL DR. SUSONI, INC.; DR. SUSONI HEALTH COMMUNITY SERVICES,
INC.; ARECIBO RESPIRATORY CARE, INC.,
Defendants, Appellees.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Hector M. Laffitte, U.S. District Judge]
Before
Lynch, Circuit Judge,
Howard, Circuit Judge,
and Shadur,* Senior District Judge.
Alvaro R. Calderon, Jr., with whom John E. Mudd was on the
brief, for appellant.
Luis A. Oliver, with whom Fiddler González & Rodríguez LLP,
McConnell Valdés, and Roberto C. Quiñones Rivera were on the brief,
for appellees.
January 14, 2003
*
Of the Northern District of Illinois, sitting by designation.
LYNCH, Circuit Judge. Dr. Alga Morales-Villalobos, an
anesthesiologist, brought antitrust claims under 15 U.S.C. § 1
(2000) (Section 1 of the Sherman Anti-Trust Act) and pendent state
law claims against her former employers, the overlapping directors
of an anesthesiology group and two hospitals. She alleged that the
exclusive dealing arrangement between the hospitals and the group
prevented her from competing to offer her services. She also
alleged that the defendants engaged in a group boycott to exclude
her from the anesthesiology group, which had an exclusive contract
at local hospitals, and subsequently denied her certification to
practice at those hospitals.
The defendants moved to dismiss for failure to state a
claim, which the court allowed, with leave to amend. Morales-
Villalobos then filed an amended complaint amplifying her
allegations. The district court granted the motion to dismiss the
amended complaint, holding that Morales-Villalobos had failed to
sufficiently allege the relevant geographic market and an antitrust
injury. Morales-Villalobos v. García-Lloréns, 193 F. Supp. 2d 401,
405-09 (D.P.R. 2002)(opinion and order). We reverse, though
sympathetic to the difficulties posed by this area of law.
I.
We review de novo a district court's dismissal of a
complaint for failure to state a claim under Fed. R. Civ. P.
12(b)(6). Chute v. Walker, 281 F.3d 314, 318 (1st Cir. 2002). "We
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accept as true the well-pleaded factual allegations of the
complaint, draw all reasonable inferences therefrom in the
plaintiff's favor and determine whether the complaint, so read,
[may] justify recovery on any cognizable theory." Martin v.
Applied Cellular Tech., Inc., 284 F.3d 1, 6 (1st Cir. 2002). "The
issue is whether the complaint states a claim under the Sherman
Act, assuming the factual allegations to be true and indulging to
a reasonable degree a plaintiff who has not yet had an opportunity
to conduct discovery." DM Research, Inc. v. Coll. of Am.
Pathologists, 170 F.3d 53, 55 (1st Cir. 1999).
The facts as described in plaintiff's complaint are as
follows. Morales-Villalobos is an anesthesiologist living in the
town of Arecibo, approximately 56 miles west of San Juan. In July
1995 she became an employee of Arecibo Respiratory Care, Inc.,
("ARC") one of the co-defendants. ARC provided anesthesiology
services under an exclusive contract to the two hospitals in
Arecibo performing surgeries: Hospital Dr. Susoni ("HDS") and
Hospital Regional de Arecibo Cayetano Coll y Toste, which was
managed by a subsidiary of HDS, Dr. Susoni Health Community
Services. This subsidiary later purchased that hospital outright.
The complaint provides no information on the length of the
exclusive contract. The co-defendants -- Miguel García-Lloréns,
José Arturo García-Lloréns, and Manuel Matos -- are the sole
shareholders of ARC and members of the Board of Directors of HDS.
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ARC is, in turn, the majority shareholder of HDS. José Arturo
García-Lloréns and Manuel Matos are themselves certified
anesthesiologists.
Morales-Villalobos alleges that José Arturo García-
Lloréns, Miguel García-Lloréns, and Manuel Matos were all involved
-- as HDS directors -- in the decision to award an exclusive
contract to ARC; indeed, no other HDS board members participated in
the decision. The complaint alleges that the exclusive contract
between ARC and HDS was motivated by corrupt self-dealing between
the directors and stockholders of the two corporations, several of
whom are themselves anesthesiologists and presumably benefitted
from the exclusive agreement. The inference may be drawn that the
reasons for the arrangement, accordingly, were not competitive.
Morales-Villalobos received medical privileges as a physician at
HDS in September 1995, which appear to have extended to the
Hospital Regional de Arecibo as well. In September 1997, her
privileges were renewed at HDS and the Hospital Regional de Arecibo
for a further two years.
On December 1, 1998, Morales-Villalobos was fired from
her position at ARC by Miguel García-Lloréns, the President of ARC,
despite the absence of patient complaints (as alleged in the
complaint, which we must take to be true). The following year,
Morales-Villalobos was not recertified for privileges at HDS.
Because of ARC's exclusive arrangement with HDS, once plaintiff was
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fired by ARC, she could not find work as an anesthesiologist at
either hospital in Arecibo. HDS also rejected a request by Dr.
Ramos Escoda, Morales-Villalobos's former husband and a surgeon who
practices in Arecibo, to have her administer anesthesia to his
private surgery patients at HDS. Other physicians in the area
have also indicated their willingness to use Morales-Villalobos's
services, but are prevented from doing so at these hospitals.
Moreover, HDS prevented Morales-Villalobos from entering the
medical facility by placing fliers on the walls and posting
security guards at the hospital doors.
Morales-Villalobos alleges that HDS and the Hospital
Regional de Arecibo have "complete market power" in the Arecibo
region, because they are able to offer a complete line of medical
services, and because they are the only hospitals approved as
Medicare providers. They are the only hospitals within the Health
Region of Arecibo, as defined by the Health Reform Program of the
Government of Puerto Rico, which provides medical care for indigent
patients. Patients covered under the Health Reform Program are not
allowed to seek services in San Juan or other cities in Puerto
Rico. Morales-Villalobos alleges she provides Medicare services to
patients of Dr. Escoda. Half of the total revenue received by the
Arecibo hospitals comes from Medicare, which provides health
coverage for individuals 65 years old or older, 42 U.S.C. § 1395c
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(2002). An inference may be drawn that such patients are less
likely to be able to make a 56-mile trip to hospitals in San Juan.
The other health region relatively near Arecibo is the
Manatí Health Region, which encompasses the city of Manatí, in
which there are three hospitals at which surgery is performed.
Morales-Villalobos says it would be impossible for her to practice
in Manatí, because all of these hospitals have exclusive contracts
with anesthesiology groups. Perhaps more importantly, her
referring physicians in the Arecibo region do not have privileges
in Manatí.
Morales-Villalobos also alleges that the quality of
patient care has worsened as a result of ARC's exclusive contract.
She cites understaffing, with one anesthesiologist routinely
expected to cover two geographically-separated hospitals, and
nurses administering anesthesia without the supervision of an
anesthesiologist. She also alleges an increase in cost relative to
other sectors of the market.
Morales-Villalobos alleges that she has been blocked from
practicing anesthesiology in Arecibo, her hometown, and that she
has also suffered damages to her professional reputation as a
result of her termination by ARC. She alleges there are doctors
who wish to use her as an anesthesiologist but cannot because she
has been denied privileges at the only hospitals in Arecibo. She
characterizes herself as a competitor of ARC. She requests either
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renewal of her medical privileges at HDS facilities and an order
requiring defendants to allow her to administer to elective private
patients, or a declaration that the exclusive contract is illegal,
economic damages, and an order to open HDS to Medicare providers.
II.
The district court dismissed Morales-Villalobos's
complaint on two bases: first, that she failed to adequately define
the geographic market; and second, that she lacked antitrust
standing. Neither issue can be evaluated without reference to
plaintiff's theories of recovery. At this most preliminary stage,
the bare bones of two different theories are suggested by
plaintiff's complaint. The first is that, as an anesthesiologist
in Arecibo, she is a direct competitor of ARC and is precluded by
the exclusive dealing arrangement from offering her services to the
only two hospitals in Arecibo. The second is that the defendants
have engaged in a group boycott, in a horizontal arrangement
excluding her through expulsion, which precludes her from offering
her services. Neither theory is actionable as a per se violation.
The district court dismissed the claim first for lack of
a proper geographic market. Here, the plaintiff's claim is that,
as a seller of services, she was foreclosed from the outlets
reasonably available. For an anesthesiologist, the primary outlets
for her services are ordinarily hospitals and clinics. Of course,
even substantial foreclosure in a relevant market is not
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necessarily unlawful, see Tampa Elec. Co. v. Nashville Coal Co.,
365 U.S. 320, 328-29 (1961), but whether the restraint is
horizontal or vertical, substantial foreclosure is ordinarily a
requirement for a seller arguing that she or he has been
unreasonably excluded from opportunities to sell. Id.
In this instance, the extent of foreclosure depends
greatly on whether the plaintiff's market is anesthesiology
services within Arecibo, or whether the market encompasses the
neighboring town of Manatí, or whether it includes other parts or
all of Puerto Rico, or whether it also includes part or all of the
continental United States. Depending on the circumstances,
foreclosure might range from nearly complete (in Arecibo) to a
trivial percentage (if the market is the entire United States).
There is no mechanical rule -- the issue depends on circumstances,
see 2A P.E. Areeda & H. Hovenkamp, Antitrust Law ¶ 570, at 342-44
(2d ed. 2002) -- and while there are arguments for a larger market,
the matter cannot be resolved on the face of the complaint.
The district court also dismissed on grounds that the
plaintiff lacked antitrust standing. The doctrine of antitrust
standing is occasionally used to describe but-for causation, see
SAS of P.R., Inc. v. P.R. Tel. Co., 48 F.3d 39, 43 (1st Cir. 1995),
and perhaps more often to exclude indirectly injured parties who
have suffered actual injury but as a result of violations that
directly injured intermediate entities, e.g., Hanover Shoe, Inc. v.
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United Shoe Mach. Corp., 392 U.S. 481, 494 (1968) (excluding
indirect purchasers). Perhaps the most common use of the phrase is
to describe cases where there is actual injury from an antitrust
violation but the impact on the would-be plaintiff results from
what closer analysis reveals to be a pro-competitive transaction.
E.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488
(1977).
Here it is not apparent, on a motion to dismiss, why
Morales-Villalobos lacks antitrust standing. She claims to be
directly injured by exclusion from ARC and, in consequence of that
exclusion and the exclusive dealing arrangement, by exclusion from
the two Arecibo hospitals. There is thus alleged but-for
causation, a direct injury to plaintiff as a supplier, and no
obvious reason why -- if the exclusive dealing or group boycott
charges amount to a violation -- the injury to her would not be of
the kind that antitrust laws are intended to address. If some
reason does exist, defendants can develop it on remand.
Of course, the defendants may be expected to argue that
quality control and other legitimate concerns justify whatever
exclusive dealing arrangements exist, as well as the exclusion of
the plaintiff from ARC.1 But these are matters that go to the
1
Going beyond the allegations of the complaint, defendants'
memorandum in support of their motion to dismiss states that
plaintiff was fired because "in [ARC's] principals' considered
view, she was not performing her duties adequately." Yet
defendants chose to test the complaint by Rule 12(b)(6) motion, and
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question of whether the arrangements are violations of the
antitrust laws and not whether the plaintiff is a proper party to
vindicate those claims. As to whether the arrangements are anti-
competitive, this is obviously a factual matter that -- given the
allegations -- can hardly be resolved on the face of the complaint.
It is true that many of these antitrust cases brought by
excluded medical care providers are ultimately decided against
plaintiffs, usually after summary judgment or trial. See, e.g.,
Mathews v. Lancaster Gen. Hosp., 87 F.3d 624 (3d Cir. 1996);
Oksanen v. Page Mem'l Hosp., 945 F.2d 696 (4th Cir. 1991); Benjamin
v. Aroostook Med. Ctr., 937 F. Supp. 957 (D. Me. 1996); Leak v.
Grant Med. Ctr., 893 F. Supp. 757 (S.D. Ohio 1995). But that does
not mean all such claims are hopeless and should be resolved by
motion to dismiss the complaint.
Reversed. Costs are awarded to Morales-Villalobos.
the district court judge quite appropriately considered the motion
under the Rule 12(b)(6) standards.
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